State-run banks may continue to see stress on the asset quality and their gross non-performing assets are likely to be in the range of 4.4-4.7 per cent by the end of current fiscal, says domestic credit rating agency Icra.
The report also warned that PSBs' fresh NPA generation rate may remain at elevated levels in the short-term.
"We expect public sector banks' (PSBs) gross NPAs to remain at 4.4-4.7 per cent by March 2015 as against 4.4 per cent as on March 2014," Icra Senior Vice-President and Co-Head (Financial Sector) Vibha Batra told reporters in a webinar here today.
For the banking system as a whole, gross NPAs declined to 3.9 per cent in FY'14 from 4.1 per cent as of December 2013, following 30 basis points decline in PSBs gross NPAs to 4.4 per cent.
As of March 2014-end, tier-I capital of PSBs stood at around 8.6 per cent as against the requirement of 6.5 per cent, while that of private sector banks was close to double the requirement at 12.8 per cent.
The rating agency said economic revival will hold the key for reduction in fresh NPA generation rate.
It expects a lag of one to two quarters to reflect the impact of economic recovery on fresh NPA generation.
"Going forward, PSBs credit provisioning could decline marginally provided they are able to control fresh NPA generation rate as well as fresh flow of restructuring," she said.